Material Handling
Saturday | 01 April, 2006 | 4:28 am

Shipping worry out to sea

Written by By Bob Garragher

The recent firefight last month between the Bush Administration and the GOP-led Congress was a political skirmish that echoed memories of the Panama Canal debate in the U.S. Senate back in the late 1970s.

Back then, the argument against the transfer of the canal focused on national security concerns--the same argument passionately invoked by opponents of the planned takeover by a United Arab Emirates company of the terminal operations of six major U.S. ports including New York, New Jersey, Philadelphia, Baltimore, Miami and New Orleans.

But back during Jimmy Carter's presidency in 1978--the year the Senate approved the Panama Canal Treaty by one vote--no one had heard of al-Qaida or envisioned that a terrorist attack like the one carried out on Sept. 11, 2001 would ever occur on U.S. soil. But a year later, President Carter and America witnessed firsthand terrorism fueled by anti-American sentiment when Iranian students stormed the U.S. embassy in Tehran and took 66 Americans hostage, holding most of them captive for 444 days.

How could President Bush, who has remained steadfast in his conviction to prosecute the war on terror, support a deal that would allow the home country of two of the 19 Sept. 11 hijackers to take control of such vital port operations, which are integral to America's livelihood and national security?

But, the U.A.E. has been a strong proponent for the American war effort. So, why shouldn't America support such a sale to an Arab ally who has stood firm with the United States during the war on terror?

Could the strong public outcry against the transfer of these six port operations be based more on a growing anti-Arab sentiment in this country rather than a threat to national security?

Those are questions that will be debated for weeks on the Sunday talk shows, during power lunches in Washington and throughout America leading up to the November 2006 congressional elections. This article, on the other hand, will take a look at our ports--the role they play in America's economy--and whether adequate security measures exist in order to foil what many Americans believe will be the next terrorist attack on our homeland--a WMD in a shipping container.

Wartime targets
Throughout America's history ports have proved to be the lifeblood of our economy. During colonial times trade with England and the Far East fueled the U.S. quest for independence and later the westward expansion of America. The United States was founded on trade and during its 230 years as a nation, trade has continued to have a major impact on our economy, as well as every American's livelihood.

No one realized the critical importance of trade to the economic vitality of America more than President Abraham Lincoln. It was Lincoln who, within days of the Confederate bombardment of Fort Sumter in Charleston, S.C., in 1861, ordered a naval blockade of all southern ports stretching from Virginia to Texas. This maneuver placed a stranglehold on the South's economic ties with Europe, helping to bring about an end to America's Civil War.

Today, a major terrorist attack on one or more of America's 361 ports and harbors (many of which are operated by foreign-owned entities), could easily have a more profound impact on the entire U.S. and world economy than Lincoln's blockade--not to mention the American psyche.

Importing revenue
According to the American Association of Port Authorities, each of America's 50 states, on average, relies on 13 to 15 ports to handle its imports and exports, which totals more than $1.3 billion worth of goods moving in and out of America's ports each day.

Key commodities entering U.S. ports from abroad include: crude petroleum and petroleum products, manufactured goods, chemicals, agricultural products and coal. From our ports, U.S. producers export agricultural products, manufactured goods, chemicals, coal, petroleum products, pulp, waste paper, other forest products and steel.

Last year was a robust year at America's ports, Christopher Koch, president and CEO of the Word Shipping Council, recently noted in testimony on Capitol Hill. "In 2005, American businesses imported roughly 11 million loaded cargo containers into the United States. The liner shipping industry transports on average about $1.5 billion worth of containerized goods through U.S. ports each day. In 2006, at projected trade growth rates, the industry will handle roughly 12 million U.S.-import container loads. And these trade-growth trends are expected to continue after 2006."

Public ports also play a critical logistical role in national security by providing embarkation points for America's military might, as well as U.S. peacekeeping and humanitarian efforts abroad. And the cruise industry, which has recently grown at an annual rate of nearly 8 percent, spends over $13 billion annually on goods and services--generating 295,000 jobs in the United States

The economic activity around America's port facilities has been booming during the past two decades, and no one within the industry expects that level of activity to slow down anytime soon.

Vulnerability at bay
Koch, who testified before the Senate Commerce, Science and Transportation Committee on Feb. 28 on port and maritime security, said, "The Department of Homeland Security has stated that there are no known credible threats that indicate terrorists are planning to infiltrate or attack the United States via maritime shipping containers. At the same time, America's supply chains extend to tens of thousands of different points around the world, and the potential vulnerability of containerized transportation requires the development and implementation of prudent security measures. Like many parts of our society, we thus confront an unknown threat, but a known vulnerability."

Due to their physical size and general nature of business with thousands of trucks and ships entering and leaving America's ports daily, it would be nearly impossible for the United States to develop an airtight security blanket over its port operations. However, in the more than four years since the Sept. 11 tragedies, the federal government, along with state and local governments and the terminal operators have embarked upon a myriad of programs designed to tighten security throughout America's network of ports.

Exposed borders
In enacting the Maritime Transportation Security Act of 2002 (MTSA), Congress set in motion the development of a number of critical programs designed to combat the threat of maritime terrorism by helping to expand America's borders.

The Department of Homeland Security, through its U.S. Coast Guard and the Customs and Border Protection Service (CBP), served as the lead federal agency in shepherding a series of security-enhancing measures at the ports.

One such measure requires that ships file advance notice with the Coast Guard 96 hours before arriving at a U.S. port of the contents of its cargo, the nationality of its crew and the port of embarkation in order to assist the Coast Guard, determining whether closer scrutiny of the particular shipment is merited.

CBP has also successfully implemented its Container Security Initiative whereby foreign governments and terminal operators provide CBP personnel access to inspect containers before being loaded on ship for transport to the United States. To date, nearly 140 trading partners shipping out of 40 ports worldwide have entered agreements with CBP in providing such access.

Other programs recently adopted to strengthen port security include the Automated Targeting System through which the CBP attempts to screen all cargo before it arrives in the United States and the Customs Trade Partnership Against Terrorism program by which the CBP created an international partnership with nearly 5,800 businesses, including most of the largest U.S. importers, a collaborative effort that works with and uses ideas from the industry to improve security standards for supply-chain and container security.

But Clark Kent Ervin, the inspector general of the Department of Homeland Security from 2003 to 2004 and the author of the soon-to-be-released "Open Target: Where America is Vulnerable to Attack," recently wrote in a New York Times op-ed that, "Most terrorism experts agree that the likeliest way for a WMD to be smuggled into our country would be through a port. After all, some 95 percent of all goods from abroad arrive in the United States by sea, and yet only about 6 percent of incoming cargo containers are inspected for security threats."

Out-of-pocket security
Terminal operators, as well as state and local governments, have invested heavily in upgrading surveillance equipment at ports, as well as hiring more security personnel. The Coast Guard, in studying the vulnerability of U.S. ports to a potential terrorist attack, estimated that it would take an investment of nearly $5.4 billion for 10 years to make ports more secure.

But at a time when America is waging a war on two fronts, and with deficit spending as the norm ever since the Sept. 11 attacks, much-needed federal monies are hard to come by these days. As such, the initial investment in these strategic upgrades, in some views, has been borne disproportionately by the terminal operators and state and local governments to date.

In a February Washington Times op-ed, Bernard Groseclose, president and CEO of the South Carolina State Ports Authority, in referencing the MTSA, wrote, "Federal law mandating port security enhancements set up a program in 2002 to help protect port facilities from terrorist attack. This program has been dramatically under-funded, leaving ports no choice but to pay the lopsided balance themselves to ensure that their facilities are safe and secure--not only for the nearly 5 million Americans who earn their livelihood in the maritime industry, but also for the urban communities near commercial seaports and for the well-being of the nation's economy, in which ports and goods movement play a critical role. The problem is, this has required ports to divert limited funds away from expanding port infrastructure in order to pay for hardening their facilities against terrorism."

And with no sign of trade levels slowing or even leveling off in the years to come, delaying those much-needed port infrastructure improvements could cause a ripple effect throughout the distribution chain. Assuming a growing ocean trade, without port infrastructure improvements and enhancements, the likelihood of undue delays in port arrivals and departures becomes a real possibility. Buyers of foreign goods or exporters of U.S. materials will have to adjust their delivery and shipping schedules accordingly.

Congress' next move
Port security will certainly be at the forefront of Congress' agenda between now and the November 2006 election. While the "firing" appears to have subsided over the Dubai Ports (DP) World port deal announced last February, the political damage caused by this issue will have lasting effects throughout the remainder of the 109th Congress.

True, the recently initiated 45-day investigation by the Committee on Foreign Investments in the United States (CFIUS), which had previously approved the deal before the firefight on Capitol Hill, and DP's subsequent announcement that it would sell its interests in the six U.S. ports to an unrelated, wholly-owned U.S. company, have diffused some of the furor over the ports deal. But it is unclear whether the port issue has been resolved.

During a Sunday morning talk show on Fox News in mid-March, two prominent Republican members of the Senate provided viewers with diverging opinions as to how the DP World ports issue will play out over the next few months.

Senate Majority Leader and potential GOP candidate for president in 2008 Bill Frist (R-Tenn.) indicated that the potential did exist that the deal might gain new life, particularly if DP World couldn't find a U.S. buyer for the six U.S. ports in question. "We have to wait and see if they're [DP World] going to do it," Frist said. "I would still encourage the CFIUS process to stay underway in the event they don't, so that we, in the event it doesn't work out . . . can act and act accordingly."

Frist's Senate colleague and chairman of the Senate Armed Services Committee Sen. John Warner of Virginia, when asked his opinion about what will happen next said, "The deal is over."

Warner, a former secretary of the Navy, who, unlike Frist, was there in the Senate when the Panama Canal vote took place 28 years ago, noted, "I do not think Congress should take any more action on this ports issue." Rather, he indicated that Congress should "put its attention on legislation to strengthen port security and to rewrite the CFIUS law."

Funny how neither mentioned anything about money. MM

By Bob Garragher, from the April 2006 issue of Modern Metals.


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